Fishing For Online Riches

An Osaka-based outdoor goods vendor gets more than just nibbles on its site.

It worked. In addition to attention, Naturum has also garnered a pretty healthy cash flow, and is now one of Japan's most successful online fishing and outdoor goods stores, recording sales of ¥320 million in the first half of 2000 -- with a whopping 80 percent being done via the Web. The site has also received attention in the form of numerous awards, including the Nikkei Best Shop award and the Best EC shop award from EC Kenkyusha (an e-commerce promotion organization), as well as investment from the likes of Hewlett Packard, Yahoo, and Softbank.

In a fall 1999 meeting of Beta Valley (Osaka's answer to Tokyo's Bit Valley), Nakajima met HP representatives who were searching for companies to fund as part of their new Garage Program. The program was set up to provide technology assistance and funding to startup companies, and Naturum became the first Japanese venture to participate. Softbank Investments also wanted to buy stock in the company, and through this arrangement, Nakajima was introduced to Yahoo, which wanted to strengthen its e-commerce division. Yahoo feared it was losing out to Rakuten, Japan's premiere Internet mall operator (reporting revenues of ¥1.13 billion for the first half of 2000), and thought that investing in Naturum would help it gain leverage in the Japanese market. Yahoo came onboard last December for an undisclosed amount.

Naturum can attribute at least some of its online success to focus, a quality noticeably lacking in many failed dot-coms on both sides of the Pacific. Naturum's sole business is, simply put, selling fishing and outdoor sporting goods via their single Osaka store and the Net. "I am a shoubainin (merchant)," says Nakajima. "People in Tokyo are excited about e-commerce and IT business and so forth, but the way I see it, staying alive in the world of e-commerce involves the same factors (as in-store sales): having a wide variety of goods, reasonable prices, good explanations, and advice," he adds in true Kansai mercantilist spirit. He believes that new technology and services are necessary too, but only to make possible the same sort of services customers would receive in the store. The fact that 80 percent of Naturum's sales are now transacted online strongly supports his view.

The Naturum site employs an Oracle database running on Hewlett Packard hardware, and Nakajima has developed his own B2B system, called Nexas (Naturum Extra Administra-tion System) 4. The Nexas 4 engine allows outdoor and fishing goods makers to monitor orders placed over the Naturum Web site in real time.

Naturum's Web site

Naturum also claims to be the first e-commerce site in Japan to create a free affiliate system using GaiaX's community tools, which allow individual users to create their own Web sites that link back to Naturum's site. This network, a sort of Web ring, links hundreds of outdoor sports enthusiasts' sites, who tend to post passionate praise and recommendations of whatever goods or gadgets they happen to adore. The recommendations link right back to Naturum, where -- no surprise here -- the products are available for purchase. While fine in theory, the affiliate system has been running since May 2000 without noticeably increasing sales. Nakajima has introduced added incentives, like discounts on group sales made through affiliates, but views the affiliate system as a loss-leader service for users to utilize, rather than a profit generator. In the meantime, Naturum is generating lots of revenue through the portal site and in the shop.

Naturum's latest technological acquisition is Silver Egg's AIgent, a sophisticated recommendation system which utilizes AI technology to track customer preferences and make product recommendations based on what the customer views and on previous purchases (see "Online Marketing With AI," page 55, October 2000). Users click a recommendation icon, and a selection of items chosen for them by the AIgent server pops up in a window onscreen. David Leangen, CEO of Konova Solutions, a Canadian-based knowledge management company which utilizes AI technology, says, "Naturum's use of Silver Egg's technology clearly shows that they understand the importance of personalized content. AI is making a comeback, since it can help companies personalize their marketing efforts to their potential customers on a massive scale." Personalized marketing is almost a prerequisite for attaining Nakajima's ideal of in-store services on the Net, and with over 130,000 products and thousands of customers, it becomes vital to help customers find what they want when they want it. With only a few months of AIgent performance so far, it's too soon to say if users are happy with the results; if they are, AIgent should go a long way toward keeping competitors at bay and customers logged on.

Nakajima is also exploring the potential of mobile sales. Due to screen space limitations, Naturum's current i-mode site simply provides some basic information about the shop. But Nakajima is developing an e-com enabled version for launch sometime this year. "We will supplement this service with ads and articles in magazines and sports newspapers, with i-mode merely serving as a purchasing tool," says Nakajima. "That way, we won't overload the small screen." Some online vendors here run ads with full product descriptions in popular magazines like Oggi and Can Can. The ads display a code number, and mobile shoppers simply have to type in the code to order the products. Nakajima envisions a similar purchasing system for Naturum.

Nakajima may do well to look at other integrated mobile marketing approaches as well. "If they partnered with information services providing, for example, fishing and weather conditions or i-mode fishing game sites, they would draw customers in," suggests David Moskowitz, president of I-kaiwa, a Web- and mobile phone-based language learning site. He also warns, however, that "payment systems are still in their infancy, and Japanese customers are still a bit wary." Nonetheless, the potential is there. Says Nakajima: "At first we will be happy if i-mode sales make up even 5 percent of the total, though we hope that the figure rises to about 20 percent in 2002."

For now, Nakajima hopes that Naturum will evolve into a key part of the "infrastructure of the online sporting world." Given the Japanese keenness for all things outdoors and Naturum's expanding services and strong technology foundations, he appears to be on track to landing a winner.